The Potential Impacts of Credit Rating Agencies on the Islamic Republic of Iran’s economic performance

Authors

Department of Islamic Economics, University of Qom

Abstract

Credit rating agencies have a significant impact on reducing asymmetric information between lenders and borrowers. The purpose of this paper is to provide a comprehensive analysis of the role of credit rating agencies in the capital market, how to play this role and the effects of these institutions on the economy. For this purpose, using a library-based method, the first step is to review the research background in this field. Then, by presenting the historical development of rating agencies and the concept of credit ratings, and evaluating the need for these institutions, we focused on the general realms of influencing credit rating agencies on the economy. These areas included domestic and foreign investment, market efficiencies, corporate competition, economic justice, and meritocracy. in section 5, we examined how these institutions influence the economy. In addition, with respect to concepts like asymmetric information and transparency, the impact of credit rating agencies on these two subjects was discussed, and finally the conclusion was presented. The results show that with the existence of credit rating agencies, because of the reduction of asymmetric information and the ease of analyzing the creditworthiness, investing will be increased, and as a result, we'll see the growth of production, employment, export, and economic welfare.

Keywords

References

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Journal of Economic Essays; an Islamic Approach
Volume 18, Issue 35 - Serial Number 35
October 2021
Pages 193-224

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